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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                 
Commission File Number: 001-40325
AppLovin Corporation
(Exact name of registrant as specified in its charter)
Delaware45-3264542
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
1100 Page Mill Road
Palo AltoCalifornia 94304
(Address of registrant’s principal executive offices, including zip code)
(800839-9646
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange
on which registered
Class A common stock, par value $0.00003 per shareAPPThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  


Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of November 2, 2023, the number of shares of the registrant’s Class A common stock outstanding was 264,638,950 and the number of shares of the registrant’s Class B common stock outstanding was 71,162,622.



Table of Contents
Page
 
Item 5.



NOTE ABOUT FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include statements about:
our future financial performance, including our expectations regarding our revenue, cost of revenue, and operating expenses, and our ability to achieve or maintain future profitability;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
the demand for our AppLovin Software Platform and AppLovin Apps;
our ability to attract and retain clients and users;
our ability to develop new products, features, and enhancements for our AppLovin Core Technologies and AppLovin Software Platform and to launch or acquire new AppLovin Apps and successfully monetize them;
our ability to compete with existing and new competitors in existing and new markets and offerings;
our ability to successfully acquire and integrate companies and assets and to expand and diversify our operations through strategic acquisitions and partnerships;
our ability to maintain the security and availability of our AppLovin Core Technologies, AppLovin Software Platform, and AppLovin Apps;
our expectations regarding the effects of existing and developing laws and regulations, including with respect to taxation and privacy and data protection;
our ability to manage risk associated with our business;
our expectations regarding new and evolving markets;
our ability to develop and protect our brand;
our expectations and management of future growth;
our expectations concerning relationships with third parties;
our ability to attract and retain employees and key personnel;
our expectations regarding our share repurchase program;
our expectations regarding the macroeconomic environment, including rising inflation and interest rates, uncertainty in the global banking and financial services markets, the war in Ukraine and the crisis in the Middle East; and
our ability to maintain, protect and enhance our intellectual property.
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.
1

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors, including those described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
Neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Moreover, the forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, partnerships, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
2

PART I – FINANCIAL INFORMATION (UNAUDITED)
Item 1. Condensed Consolidated Financial Statements
AppLovin Corporation
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)
(unaudited)
September 30,
2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents$332,491 $1,080,484 
Accounts receivable, net849,140 702,814 
Prepaid expenses and other current assets119,161 155,785 
Total current assets1,300,792 1,939,083 
Property and equipment, net102,156 78,543 
Operating lease right-of-use assets52,998 60,379 
Goodwill1,813,567 1,823,755 
Intangible assets, net1,386,591 1,677,660 
Other assets349,124 268,426 
Total assets$5,005,228 $5,847,846 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$281,103 $273,196 
Accrued and other current liabilities181,679 147,801 
Licensed asset obligation13,389 15,254 
Short-term debt215,000 33,310 
Deferred revenue77,899 64,018 
Operating lease liabilities13,800 14,334 
Deferred acquisition costs, current22,604 31,045 
Total current liabilities805,474 578,958 
Long-term debt2,912,302 3,178,412 
Operating lease liabilities, non-current46,887 54,153 
Licensed asset obligation, non-current11,794 26,970 
Other non-current liabilities132,981 106,676 
Total liabilities3,909,438 3,945,169 
Commitments and contingencies (Note 4)
Stockholders’ equity:
Preferred stock, $0.00003 par value—100,000,000 shares authorized, no shares issued and outstanding as of September 30, 2023 and December 31, 2022
  
Class A and Class B Common Stock, $0.00003 par value—1,700,000,000 (Class A 1,500,000,000 and Class B 200,000,000) shares authorized, 335,783,928 (Class A 264,621,306 and Class B 71,162,622) and 373,873,683 (Class A 302,711,061 and Class B 71,162,622) shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively
11 11 
Additional paid-in capital2,174,658 3,155,748 
Accumulated other comprehensive loss(93,657)(83,382)
Accumulated deficit(985,222)(1,169,700)
Total stockholders’ equity1,095,790 1,902,677 
Total liabilities and stockholders’ equity$5,005,228 $5,847,846 


The accompanying notes are an integral part of these condensed consolidated financial statements.
3

AppLovin Corporation
Condensed Consolidated Statements of Operations
(in thousands, except for per share data)
(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenue$864,256 $713,099 $2,329,826 $2,114,751 
Costs and expenses:
Cost of revenue265,049 300,988 785,584 886,697 
Sales and marketing212,352 196,785 607,755 719,014 
Research and development159,288 122,059 441,563 389,417 
General and administrative41,249 44,000 116,231 144,988 
Total costs and expenses677,938 663,832 1,951,133 2,140,116 
Income (loss) from operations186,318 49,267 378,693 (25,365)
Other income (expense):
Interest expense and loss on settlement of debt
(78,583)(48,627)(204,081)(117,141)
Interest income and other, net1,490 969 27,062 3,501 
Total other expense, net(77,093)(47,658)(177,019)(113,640)
Income (loss) before income taxes109,225 1,609 201,674 (139,005)
Provision for (benefit from) income taxes586 (22,053)17,196 (25,570)
Net income (loss)108,639 23,662 184,478 (113,435)
Less: Net loss attributable to noncontrolling interest (109) (201)
Net income (loss) attributable to AppLovin$108,639 $23,771 $184,478 $(113,234)
Less: Net income attributable to participating securities$804 $122 $963 $ 
Net income (loss) attributable to AppLovin common stockholders:
Basic$107,835 $23,649 $183,515 $(113,234)
Diluted$107,869 $23,653 $183,545 $(113,234)
Net income (loss) per share attributable to AppLovin common stockholders:
Basic$0.32 $0.06 $0.51 $(0.30)
Diluted$0.30 $0.06 $0.50 $(0.30)
Weighted average common shares used to compute net income (loss) per share attributable to AppLovin common stockholders:
Basic341,435,759 369,389,170 357,009,609 371,736,763 
Diluted356,906,222 378,462,207 368,259,513 371,736,763 









The accompanying notes are an integral part of these condensed consolidated financial statements. 
4

AppLovin Corporation
Condensed Consolidated Statements of Comprehensive Income (Loss)
(in thousands)
(unaudited)

Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Net income (loss)$108,639 $23,662 $184,478 $(113,435)
Other comprehensive loss:
Foreign currency translation adjustment, net of tax(17,127)(11,794)(10,275)(94,691)
Total other comprehensive loss, net of tax
(17,127)(11,794)(10,275)(94,691)
Comprehensive income (loss) including noncontrolling interest91,512 11,868 174,203 (208,126)
Less: Comprehensive loss attributable to noncontrolling interest (109) (201)
Comprehensive income (loss) attributable to AppLovin$91,512 $11,977 $174,203 $(207,925)






















The accompanying notes are an integral part of these condensed consolidated financial statements.
5

AppLovin Corporation
Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Redeemable
Noncontrolling
Interest
Class A and Class B Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive
Income (Loss)
Accumulated
Deficit
Total
Stockholders’
Equity
SharesPar Value
Balance as of December 31, 2022$ 373,873,683 $11 $3,155,748 $(83,382)$(1,169,700)$1,902,677 
Stock issued in connection with equity awards— 4,061,015 — 2,974 — — 2,974 
Shares withheld related to net share settlement— (1,281,849)— (19,167)— — (19,167)
Repurchase of Class A common stock— (5,396,617)— (76,358)— — (76,358)
Stock-based compensation— — — 82,966 — — 82,966 
Total other comprehensive income, net of tax— — — — 10,006 — 10,006 
Net loss— — — — — (4,518)(4,518)
Balance as of March 31, 2023$ 371,256,232 $11 $3,146,163 $(73,376)$(1,174,218)$1,898,580 
Stock issued in connection with equity awards— 4,053,303 — 3,677 — — 3,677 
Shares withheld related to net share settlement— (1,503,757)— (37,436)— — (37,436)
Repurchase of Class A common stock— (25,483,835)— (503,448)— — (503,448)
Issuance of Class A common stock under employee stock purchase plan— 174,670 — 2,071 — — 2,071 
Stock-based compensation— — — 76,753 — — 76,753 
Total other comprehensive loss, net of tax— — — — (3,154)— (3,154)
Net income— — — — — 80,357 80,357 
Balance as of June 30, 2023$ 348,496,613 $11 $2,687,780 $(76,530)$(1,093,861)$1,517,400 
Stock issued in connection with equity awards— 4,621,926 — 11,319 — — 11,319 
Shares withheld related to net share settlement— (1,549,778)— (59,243)— — (59,243)
Repurchase of Class A common stock— (15,784,833)— (573,787)— — (573,787)
Stock-based compensation— — — 108,589 — — 108,589 
Total other comprehensive loss, net of tax— — — — (17,127)— (17,127)
Net income
— — — — — 108,639 108,639 
Balance as of September 30, 2023
$ 335,783,928 $11 $2,174,658 $(93,657)$(985,222)$1,095,790 





The accompanying notes are an integral part of these condensed consolidated financial statements.
6

AppLovin Corporation
Condensed Consolidated Statements of Redeemable Noncontrolling Interest and Stockholders’ Equity
(in thousands, except share data)
(unaudited)
Redeemable
Noncontrolling
Interest
Class A and Class B Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesPar Value
Balance as of December 31, 2021$201 375,089,360 $11 $3,160,487 $(45,454)$(976,954)$2,138,090 
Stock issued in connection with equity awards— 1,179,554 — 6,541 — — 6,541 
Shares withheld related to net share settlement— (89,319)— (4,227)— — (4,227)
Repurchase of Class A common stock— (893,556)— (43,697)— — (43,697)
Stock-based compensation— — — 44,377 — — 44,377 
Total other comprehensive loss, net of tax— — — — (13,532)— (13,532)
Net loss(41)— — — — (115,257)(115,257)
Balance as of March 31, 2022$160 375,286,039 $11 $3,163,481 $(58,986)$(1,092,211)$2,012,295 
Stock issued in connection with equity awards— 1,194,805 — 8,267 — — 8,267 
Shares withheld related to net share settlement— (234,412)— (9,384)— — (9,384)
Repurchase of Class A common stock— (5,749,856)— (210,830)— — (210,830)
Issuance of Class A common stock in connection with acquisitions— 2,579,692 — 137,422 — — 137,422 
Issuance of Class A common stock under employee stock purchase plan— 107,781 — 3,663 — — 3,663 
Stock-based compensation— — — 56,855 — — 56,855 
Total other comprehensive loss, net of tax— — — — (69,365)— (69,365)
Net loss(51)— — — — (21,748)(21,748)
Balance as of June 30, 2022$109 373,184,049 $11 $3,149,474 $(128,351)$(1,113,959)$1,907,175 
Stock issued in connection with equity awards— 1,360,814 — 6,293 — — 6,293 
Shares withheld related to net share settlement— (149,015)— (3,996)— — (3,996)
Repurchase of Class A common stock— (2,746,270)— (84,353)— — (84,353)
Stock-based compensation
— — — 44,806 — — 44,806 
Total other comprehensive loss, net of tax— — — — (11,794)— (11,794)
Net income
(109)— — — — 23,771 23,771 
Balance of September 30, 2022
$ 371,649,578 $11 $3,112,224 $(140,145)$(1,090,188)$1,881,902 





The accompanying notes are an integral part of these condensed consolidated financial statements.
7

AppLovin Corporation
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
20232022
Operating Activities
Net income (loss)$184,478 $(113,435)
Adjustments to reconcile net income (loss) to operating activities:
Amortization, depreciation and write-offs369,897 445,507 
Stock-based compensation275,058 143,943 
Change in operating right-of-use asset11,732 13,725 
Amortization of debt issuance costs and discount9,663 9,685 
Loss on settlement of debt4,337  
Other(3,906)2,133 
Changes in operating assets and liabilities, net of effect of acquisitions:
Accounts receivable(146,796)(139,350)
Prepaid expenses and other current assets28,695 (70,242)
Other assets(58,179)(4,616)
Accounts payable7,955 (7,881)
Operating lease liabilities(12,253)(15,345)
Accrued and other liabilities32,416 (2,645)
Deferred revenue14,425 (11,905)
Net cash provided by operating activities717,522 249,574 
Investing Activities
Acquisitions, net of cash acquired(51,816)(1,335,698)
Purchase of non-marketable equity securities(16,934)(56,546)
Capitalized software development costs(6,523)(4,546)
Purchase of property and equipment(4,002)(621)
Proceeds from sale of assets8,250 3,657 
Net cash used in investing activities(71,025)(1,393,754)
Financing Activities
Repurchases of stock(1,153,593)(338,880)
Principal repayments of debt(490,494)(17,482)
Payment of withholding taxes related to net share settlement(115,846) 
Payments of licensed asset obligation(15,254)(17,374)
Principal payments on finance leases(16,191)(18,099)
Payments of deferred acquisition costs(11,503)(104,998)
Payment of debt issuance cost(4,545) 
Proceeds from issuance of debt210,281  
Proceeds from revolving credit facility185,000  
Proceeds from exercise of stock options17,807 21,733 
Proceeds from the issuance of common stock under the Employee Stock Purchase Plan2,071 3,663 
Net cash used in financing activities(1,392,267)(471,437)
Effect of foreign exchange rate on cash and cash equivalents(2,223)(11,379)
Net decrease in cash and cash equivalents
(747,993)(1,626,996)
Cash, cash equivalents and restricted cash equivalents at beginning of the period1,080,484 2,570,504 
Cash and cash equivalents at end of the period$332,491 $943,508 


The accompanying notes are an integral part of these condensed consolidated financial statements.
8

AppLovin Corporation
Condensed Consolidated Statements of Cash Flows (continued)
(in thousands)
(unaudited)
Nine Months Ended
September 30,
20232022
Supplemental non-cash investing and financing activities disclosures:
Right-of-use assets acquired under finance leases$40,666 $37,433 
Right-of-use assets acquired under operating leases$4,576 $3,400 
Acquisitions not yet paid$ $40,791 
Issuance of common stock in connection with acquisitions$ $137,422 
Supplemental disclosure of cash flow information:
Cash paid for interest, net$184,600 $107,650 
Cash paid for income taxes, net of refunds$12,749 $58,770 





















The accompanying notes are an integral part of these condensed consolidated financial statements.
9

AppLovin Corporation
Notes to the Condensed Consolidated Financial Statements
(unaudited)
1. Description of Business and Summary of Significant Accounting Policies
Description of Business
AppLovin Corporation (the “Company” or “AppLovin”) was incorporated in the state of Delaware on July 18, 2011. The Company is a leader in the mobile app industry with a focus on building a software-based platform for mobile app developers to improve the marketing and monetization of their apps. The Company also has a globally diversified portfolio of apps—free-to-play mobile games that it operates through its own or partner studios.
The Company is headquartered in Palo Alto, California, and has several operating locations in the U.S. as well as various international office locations in North America, Asia, and Europe.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, the unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 28, 2023. The condensed consolidated balance sheet data as of December 31, 2022 was derived from the audited consolidated financial statements at that date but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements reflect all normal and recurring adjustments, that are, in the opinion of management, necessary for the fair presentation of the Company’s financial position, results of operations, cash flows and stockholders’ equity for the interim periods presented. The results of operations for the three and nine months ended September 30, 2023 shown in this report are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 or any other period.
Basis of Consolidation
The Company's condensed consolidated financial statements include accounts and operations of the Company and the entities in which the Company has a controlling financial interest. The typical condition for a controlling financial interest ownership is holding a majority of the voting interests of an entity; however, a controlling financial interest may also exist in variable interest entities ("VIE"), through arrangements that do not involve controlling voting interests. ASC 810 requires a variable interest holder to consolidate a VIE if it has the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and has the obligation to absorb losses of the VIE that could potentially be significant to the VIE or the right to receive benefits from the VIE that could potentially be significant to the VIE. The Company does not consolidate a VIE when the Company is not deemed the primary beneficiary. The Company evaluates its relationships with all VIEs on an ongoing basis. All intercompany transactions and balances have been eliminated upon consolidation.
Use of Estimates
The preparation of the Company's condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported and disclosed in the condensed consolidated financial statements and accompanying notes. The Company bases its estimates on assumptions, both historical and forward-looking, that are believed to be reasonable. On an ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to fair values of intangible assets and goodwill, useful lives of intangible assets and property and equipment, expected period of consumption of virtual goods, expected life of paying users, income and indirect taxes, contingent liabilities, evaluation of recoverability of intangible assets and long-lived assets, goodwill impairment, and fair value of derivatives and other financial instruments. These estimates are inherently subject to judgment and actual results could differ materially from those estimates.
Recent Accounting Pronouncements (Issued and Adopted)
In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. The ASU clarifies that a contractual restriction on the sale of an equity security is not
10

considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value. The ASU also clarifies that an entity cannot, as a separate unit of account, recognize and measure a contractual sale restriction and requires specific disclosures for equity securities subject to contractual sale restrictions. The Company adopted this ASU on January 1, 2023 with no material impact on its condensed consolidated financial statements.
2. Revenue
Revenue from Contracts with Customers
The Company generates Software Platform and Apps revenue. Software Platform revenue is generated primarily from fees collected from advertisers and advertising networks who use the Software Platform. Apps revenue consists of in-app purchase ("IAP") revenue generated from in-app purchases made by users within the Company’s apps (“Apps”), and in-app advertising ("IAA") revenue generated from advertisers that purchase ad inventory from Apps.
Software Platform Revenue
The vast majority of the Software Platform Revenue is generated through AppDiscovery and MAX, which provide the technology to match advertisers and owners of digital advertising inventory (“Publishers”) via auctions at large scale and microsecond-level speeds. The terms for all mobile advertising arrangements are governed by the Company’s terms and conditions and generally stipulate payment terms of 30 days subsequent to the end of the month. Substantially all of the Company's contracts with customers are fully cancellable at any time or upon short notice.
Software Platform Revenue is generated by placing ads on mobile applications owned by Publishers. The Company’s performance obligation is to provide customers with access to the Software Platform, which facilitates the advertiser’s purchase of ad inventory from Publishers. The Company does not control the ad inventory prior to its transfer to the advertiser, because the Company does not have the substantive ability to direct the use of nor obtain substantially all of the remaining benefits from the ad inventory. The Company is not primarily responsible for fulfillment and does not have any inventory risk. The Company is an agent as it relates to the sale of third-party advertising inventory and presents revenue on a net basis. The transaction price is the product of either the number of completions of agreed upon actions or advertisements displayed and the contractually agreed upon price per advertising unit with the advertiser less consideration paid or payable to Publishers. The Company recognizes Software Platform Revenue when the agreed upon action is completed or when the ad is displayed to users. The number of advertisements delivered and completions of agreed upon actions is determined at the end of each month, which resolves any uncertainty in the transaction price during the reporting period.
Software Platform Revenue also includes revenue generated by the Company's mobile application tracking and attribution solutions that is recognized ratably over the subscription period, generally up to twelve months.
Apps Revenue
In-App Purchase Revenue
IAP Revenue includes fees collected from users to purchase virtual goods to enhance their gameplay experience. The identified performance obligation is to provide users with the ability to acquire, use, and hold virtual items over the estimated period of time the virtual items are available to the user or until the virtual item is consumed. Payment is required at the time of purchase, and the purchase price is a fixed amount.
Users make IAPs through the Company’s distribution partners. The transaction price is equal to the gross amount charged to users because the Company is the principal in the transaction. IAP fees are non-refundable. Such payments are initially recorded as deferred revenue. The Company categorizes its virtual goods as either consumable or durable. Consumable virtual goods represent goods that can be consumed by a specific player action in gameplay; accordingly, the Company recognizes revenue from the sale of consumable virtual goods as the goods are consumed. Durable virtual goods represent goods that are accessible to the user over an extended period of time; accordingly, the Company recognizes revenue from the sale of durable virtual goods ratably over the period of time the goods are available to the user, which is generally the estimated average user life (“EAUL”).
The EAUL represents the Company’s best estimate of the expected life of paying users for the applicable game. The EAUL begins when a user makes the first purchase of durable virtual goods and ends when a user is determined to be inactive. The Company determines the EAUL on a game-by-game basis. For a newly launched game with limited playing data, the Company determines its EAUL based on the EAUL of a game with sufficiently similar characteristics.
11

The Company determines the EAUL on a quarterly basis and applies such calculated EAUL to all bookings in the respective quarter. Determining the EAUL is subjective and requires management’s judgment. Future playing patterns may differ from historical playing patterns, and therefore the EAUL may change in the future. The EAULs are generally between five and ten months.
In-App Advertising Revenue
IAA Revenue is generated by selling ad inventory on the Company's Apps to third-party advertisers. Advertisers purchase ad inventory either through the Software Platform or through third-party advertising networks (“Ad Networks”). Revenue from the sale of ad inventory through Ad Networks is recognized net of the amounts retained by Ad Networks as the Company is unable to determine the gross amount paid by the advertisers to Ad Networks. The Company recognizes revenue when the ad is displayed to users.
The Company presents taxes collected from customers and remitted to governmental authorities on a net basis.
Disaggregation of Revenue
The following table presents revenue disaggregated by segment and type (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Software Platform Revenue$504,452 $306,592 $1,265,273 $742,972 
In-App Purchase Revenue247,309 272,437 732,262 915,177 
In-App Advertising Revenue112,495 134,070 332,291 456,602 
Total Apps Revenue359,804 406,507 1,064,553 1,371,779 
Total Revenue$864,256 $713,099 $2,329,826 $2,114,751 
Revenue disaggregated by geography, based on user location, consists of the following (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
United States$500,586 $437,679 $1,393,625 $1,299,624 
Rest of the World363,670 275,420 936,201 815,127 
Total Revenue$864,256 $713,099 $2,329,826 $2,114,751 
Contract Balances
Contract liabilities consist of deferred revenue related to payments received in advance of the satisfaction of performance obligations. During the three months ended September 30, 2023 and 2022, the Company recognized $48.4 million and $48.4 million of revenue that was included in deferred revenue as of June 30, 2023 and 2022, respectively. During the nine months ended September 30, 2023 and 2022, the Company recognized $62.5 million and $78.1 million of revenue that was included in deferred revenue as of December 31, 2022 and 2021, respectively.
Unsatisfied Performance Obligations
Substantially all of the Company’s unsatisfied performance obligations relate to contracts with an original expected length of one year or less.
Publisher Bonuses
In the first quarter of 2022, the Company paid or promised to pay a total of $209.6 million in bonuses to publishers consisting primarily of non-recurring bonuses to migrate publishers to MAX, the Company's in-app mediation platform. The Company accounted for such publisher bonuses as a reduction to revenue since the publishers receiving such bonuses are also customers of the Company.
12

3. Financial Instruments and Fair Value Measurements
The following table sets forth the Company’s financial instruments that are measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):
As of September 30, 2023
Balance Sheet LocationTotalLevel 1Level 2Level 3
Financial Assets:
Money market deposit accounts
Cash and cash equivalents
$1,332 $1,332 $ $ 
Interest rate swapPrepaid expenses and other current assets$1,606 $ $1,606 $ 
Total financial assets$2,938 $1,332 $1,606 $ 
As of December 31, 2022
Balance Sheet LocationTotalLevel 1Level 2Level 3
Financial Assets:
Money market funds(1)
Cash and cash equivalents$604,399 $604,399 $ $ 
Interest rate swapsPrepaid expenses and other current assets$7,319 $ $7,319 $ 
Total financial assets$611,718 $604,399 $7,319 $ 
(1) Includes balances in money market deposit accounts of $524.2 million as of December 31, 2022.
Derivatives Not Designated as Hedging Instruments
In October 2022 and March 2023, the Company entered into multiple pay-fixed receive-variable interest rate swaps as part of its interest rate risk management strategy in connection with the term loans under a certain credit agreement, which was originally entered in August 2018 and has been subsequently amended multiple times. The Company elected to not designate the interest rate swaps as hedging instruments for accounting purposes and recorded both realized and unrealized gains and losses associated with the interest rate swaps immediately through earnings in interest expense in the Company's condensed consolidated statement of operations. The fair value of the interest rate swaps are determined using widely accepted valuation techniques including discounted cash flow analysis based on the expected cash flows of the interest rate swaps. The Company has determined that the significant inputs, such as interest yield curve and discount rate, used to value its interest rate swaps fall within Level 2 of the fair value hierarchy. In June 2023, the Company settled the March 2023 interest rate swaps with the counterparties and received $12.2 million in cash. The net cash proceeds received from the settlement of the interest rate swaps and net interest paid or received are presented in net cash provided by operating activities and the supplemental disclosure of cash paid for interest, net in the Company's condensed consolidated statement of cash flows.
As of September 30, 2023, the remaining interest rate swap had a notional amount of $1.7 billion and matures on October 31, 2023. In relation to these interest rate swaps, the Company recorded a net gain of $15.8 million during the nine months ended September 30, 2023. The net gain was not material for the three months ended September 30, 2023.
Non-Marketable Equity Securities Measured at Net Asset Value
The Company held equity interests in certain private equity funds of $54.2 million and $32.3 million as of September 30, 2023 and December 31, 2022, respectively, which are measured using the net asset value practical expedient. Under the net asset value practical expedient, the Company records investments based on the proportionate share of the underlying funds’ net asset value as of the Company's reporting date. These investments are included in other assets in the Company’s condensed consolidated balance sheets.
These funds vary in investment strategies and generally have an initial term of 7 to 10 years, which may be extended for 2 to 3 additional years with the applicable approval. These investments are subject to certain restrictions regarding transfers and withdrawals and generally cannot be redeemed with the funds. Distributions from the funds will be received as the underlying investments are liquidated. The Company’s maximum exposure to loss is limited to the carrying value of these investments of $54.2 million and the unfunded commitments of $41.1 million as of September 30, 2023.
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During the three and nine months ended September 30, 2023, the Company made total capital contributions of $0.1 million and $16.9 million related to these investments. The unrealized gains related to these investments were $2.3 million and $7.3 million, for the three and nine months ended September 30, 2023, respectively. The unrealized gains and losses were not material for the three and nine months ended September 30, 2022.
Non-Marketable Equity Securities Measured at Fair Value on a Non-Recurring Basis
In the second quarter of 2022, the Company purchased certain non-marketable equity securities for total proceeds of $38.0 million. Non-marketable equity securities are investments in privately held companies without readily determinable fair values. The Company elected the measurement alternative to account for these investments. Under the measurement alternative, the carrying value of the non-marketable equity securities are adjusted based on price changes from observable transactions of identical or similar securities of the same issuer or for impairment. Any changes in carrying value are recorded within interest income and other, net in the Company's condensed consolidated statement of operations. During the first quarter of 2023, the Company recorded an impairment charge of $5.0 million related to one of these investments. As of September 30, 2023, the carrying amount of these investments was $33.0 million, which was included in other assets in the Company’s condensed consolidated balance sheets.
4. Commitments and Contingencies
Commitments
As of September 30, 2023, the Company's non-cancelable minimum purchase commitments consisted primarily of a certain arrangement related to cloud platform services. In May 2022, the Company entered into a new order form under an existing master agreement that required the Company to purchase at least $550.0 million of cloud services through May 2025. During the nine months ended September 30, 2023, the Company made payments of $167.2 million under this arrangement, with $285.7 million of this commitment unpaid as of September 30, 2023. In addition, the Company had total unfunded commitments of $41.1 million related to investments in certain private equity funds. For additional information see Note 3 – Financial Instruments and Fair Value Measurements.
Contingencies
From time to time, the Company may have certain contingent liabilities that arise in the ordinary course of business activities. The Company accrues a liability for such matters when it is probable that future expenditures will be made, and such expenditures can be reasonably estimated.
Letters of Credit
As of September 30, 2023, the Company had outstanding letters of credit in the aggregate amount of $6.3 million, which were issued as security for certain leased office facilities under the Credit Agreement. These letters of credit have never been drawn upon.
Legal Proceedings
The Company is involved from time to time in litigation, claims, and proceedings. The outcomes of the Company’s legal proceedings are inherently unpredictable and subject to significant uncertainty.
The Company records a liability when it is probable that a loss has been incurred and the amount can be reasonably estimated. If it is determined that a loss is reasonably possible and the loss or range of loss can be estimated, the reasonably possible loss is disclosed. The Company evaluates developments in legal matters that could affect the amount of liability that has been previously accrued, and related reasonably possible losses disclosed, and makes adjustments as appropriate. Significant judgment is required to determine the likelihood of matters and the estimated amount of a loss related to such matters. To date, losses in connection with legal proceedings have not been material.
The Company expenses legal fees in the period in which they are incurred.
Indemnifications
The Company enters into indemnification provisions under agreements with other parties in the ordinary course of business, including certain customers, business partners, investors, contractors and the Company’s officers, directors and certain employees. It is not possible to determine the maximum potential loss under these indemnification provisions due to the Company’s limited history of prior indemnification claims and the unique facts and circumstances involved in each particular provision. To date, losses recorded in the Company’s condensed consolidated statements of operations in connection with the indemnification provisions have not been material. As
14

of September 30, 2023, the Company did not have any material indemnification claims that were probable or reasonably possible.
Non-income Taxes
The Company may be subject to audit by various tax authorities with regard to non-income tax matters. The subject matter of non-income tax audits primarily arises from different interpretations on tax treatment and tax rates applied. The Company accrues liabilities for non-income taxes that may result from examinations by, or any negotiated agreements with, these tax authorities when a loss is probable and reasonably estimable. If a loss is reasonably possible and the loss or range of loss can be estimated, the Company discloses the reasonably possible loss.
5. Acquisitions and Dispositions
2023 Acquisitions
During the three and nine months ended September 30, 2023, the Company recognized total earn-out costs of $9.2 million and $52.2 million, respectively, related to asset acquisitions closed in 2021 and prior. No other acquisitions were completed during the three and nine months ended September 30, 2023.
2022 Acquisitions
Business Combinations
MoPubOn January 1, 2022, the Company completed its acquisition from Twitter, Inc. of certain assets that comprised its MoPub business for a total purchase price of $1.03 billion in cash. The acquisition allowed the Company to integrate certain product features of the MoPub platform into MAX, the Company's in-app mediation platform, and migrate publishers and demand partners from the MoPub platform to MAX. The Company accounted for the acquisition as a business combination. Transaction costs incurred by the Company in connection with the acquisition, including professional fees, were $14.4 million.
The following table summarizes the allocation of the purchase consideration to the fair value of the assets acquired (in thousands):
Intangible assets
Advertiser Relationships—estimated useful life of 9 years
$212,700 
Publisher Relationships—estimated useful life of 9 years
123,300 
Developed Technology—estimated useful life of 5 years
61,800 
Tradename—estimated useful life of 3 months
60 
Goodwill632,472 
Total purchase consideration$1,030,332 
The income approach was used to determine the fair value of the advertiser relationships, publisher relationships, developed technology and tradename. Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired at the acquisition date and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. For tax purposes, a tax deductible goodwill of $645.1 million was generated as a result of this acquisition. No liabilities were assumed in the transaction.
Contemporaneously with the signing of the asset purchase agreement, the Company entered into an agreement for Twitter, Inc. to provide certain transitional services to facilitate the migration of publishers and demand partners to MAX during a three-month transitional period following the closing of the transaction (the "TSA"). The Company accounted for the TSA as a transaction separate from the business combination since it was negotiated primarily for the benefit of the Company. During the first quarter of 2022, the Company recognized total expense of $7.0 million related to the transitional services, which was included primarily in cost of revenue in the Company's condensed consolidated statement of operations.
Due to the significant integration of the MoPub business with MAX, it was impractical to determine the impact of the acquired business on revenue or earnings.
Wurl—On April 1, 2022, the Company completed its acquisition of all of the equity interests of Wurl, Inc. ("Wurl"), a connected TV (CTV) software platform company, for a total purchase price of $378.2 million, consisting of $219.3 million in cash, 2,579,692 shares of the Company's Class A common stock valued at $137.4 million and a deferred payment of $22.7 million, with a present value of $21.5 million at the closing of the acquisition, relating to an indemnity holdback amount to be paid in 18 months following the transaction close date, less any eligible claims
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against Wurl paid by AppLovin. The transaction allowed the Company to expand into the connected TV market. The Company accounted for the acquisition as a business combination. Transaction costs incurred by the Company in connection with the acquisition, including professional fees, were $1.9 million.
The following table summarizes the allocation of the purchase consideration to the fair value of the assets acquired and liabilities assumed (in thousands):
Cash and cash equivalents$400 
Accounts receivable and other current assets15,194 
Intangible assets 
Customer Relationships—estimated useful life of 15 years
41,000 
Developed Technology—estimated useful life of 6 years
60,500 
Tradename—estimated useful life of 10 years
14,700 
Goodwill264,149 
Property and equipment, net363 
Other assets159 
Accounts payable, accrued liabilities and other current liabilities(12,854)
Deferred revenue(209)
Deferred income tax liability(5,235)
Total purchase consideration$378,167 
The income approach was used to determine the fair value of the customer relationships, developed technology, and tradename. Goodwill represents the excess of the purchase price over the fair value of identifiable assets acquired and liabilities assumed at the acquisition date and is primarily attributable to the assembled workforce and expected synergies at the time of the acquisition. For tax purposes, no tax deductible goodwill was generated as a result of this acquisition.
Contemporaneously with entering into the definitive agreement, the Company also adopted a multi-year performance-based incentive plan for certain key employees of Wurl, under which the key employees may earn up to a total of $600.0 million in additional shares of the Company's Class A common stock through 2025, contingent upon the achievement of certain revenue and other performance targets by the acquired business and the continued employment of such key employees between 2023 and 2025. In April 2023, the Company amended the multi-year performance-based incentive plan into a one-year plan for 2023, under which the Company may be obligated to issue up to a total of $90.0 million in additional shares of the Company's Class A common stock, contingent upon Wurl’s achievement of certain revenue and other performance targets and the continued employment of the key employees.
The Company’s condensed consolidated statement of operations for nine months ended September 30, 2022 includes Wurl's revenue of $22.7 million and pre-tax loss of $8.7 million for the period from the acquisition date of April 1, 2022 to September 30, 2022.
The unaudited supplemental pro forma information below presents the combined historical results of operations of the Company, the MoPub business and Wurl, as if they had been acquired as of January 1, 2021 (in thousands):
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
Revenue$713,099 $2,123,783 
Net income (loss)$23,662 $(104,775)







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The unaudited supplemental pro forma information above includes the following adjustments to net loss in the appropriate pro forma periods (in thousands):
Three Months Ended September 30, 2022
Nine Months Ended September 30, 2022
An (increase) in amortization expense related to the fair value of acquired identifiable intangible assets, net of the amortization expense already reflected in actual historical results$ $(3,512)
A decrease in expenses related to the TSA $ $7,000 
An (increase) due to replacement stock awards$ $(1,221)
A decrease in expenses related to transaction costs$ $16,899 
A decrease in expenses related to transaction bonuses$ $1,101 
An (increase) in income tax provision$ $(4,625)
Asset Acquisitions
During the three and nine months ended September 30, 2022, the Company recognized total earn-out costs of $23.2 million and $98.7 million, respectively, related to asset acquisitions closed in 2021 and prior. No other asset acquisitions were completed during the three and nine months ended September 30, 2022.
Assets Held for Sale
As of September 30, 2022, the Company classified certain assets within the Apps segment as assets held for sale and recorded an impairment charge of $27.7 million in cost of revenue in the condensed consolidated statements of operations for the three and nine months ended September 30, 2022 to measure such assets at fair value less costs to sell. As of September 30, 2022, the carrying value of such assets was immaterial. The sale was subsequently closed in the fourth quarter of 2022. There were no assets classified as held for sale during the nine months ended September 30, 2023.
6. Goodwill and Intangible Assets
The following table presents the changes in the carrying amount of goodwill by reporting unit (in thousands):
Software PlatformAppsTotal
December 31, 2022$1,478,014 $345,741 $1,823,755 
Foreign currency translation(10,188) (10,188)
September 30, 2023$1,467,826 $345,741 $1,813,567 
Intangible assets, net consisted of the following (in thousands):
 Weighted-
Average
Remaining
Useful Life
(Years)
As of September 30, 2023As of December 31, 2022
 Gross
Carrying
Value
Accumulated
Amortization
Net Book
Value
Gross
Carrying
Value
Accumulated
Amortization
Net Book
Value
 
 
Long-lived intangible assets:
Apps3.9$1,830,329 $(1,083,524)$746,805 $1,790,820 $(836,375)$954,445 
Customer relationships8.5513,182 (97,174)416,008 515,084 (58,881)456,203 
User base2.568,817 (44,436)24,381 68,817 (37,122)31,695 
License asset2.359,207 (27,478)31,729 59,207 (16,901)42,306 
Developed technology3.9205,205 (79,038)126,167 206,060 (53,879)152,181 
Other4.560,100 (18,599)41,501 53,933 (13,103)40,830 
Total long-lived intangible assets2,736,840 (1,350,249)1,386,591 2,693,921 (1,016,261)1,677,660 
Short-lived intangible assets:
Apps0.347,640 (47,480)160 45,791 (44,838)953 
Total intangible assets$2,784,480 $(1,397,729)$1,386,751 $2,739,712 $(1,061,099)$1,678,613 
As of September 30, 2023 and December 31, 2022, short-lived mobile Apps were included in prepaid expenses and other current assets.
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The Company recorded amortization expenses related to acquired intangible assets as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of revenue$93,398 $111,259 $288,180 $342,115 
Sales and marketing16,829 16,619 50,397 49,543 
Total$110,227 $127,878 $338,577 $391,658 
7. Equity
In February 2022, the Company's Board authorized the repurchase of up to $750.0 million of the Company’s Class A common stock. Repurchases may be made from time to time through open market purchases or through privately negotiated transactions, subject to market conditions, applicable legal requirements and other relevant factors. Open market repurchases may be structured to occur in accordance with the requirements of Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company may also, from time to time, enter into Rule 10b-5 trading plans, to facilitate repurchases of shares. In May and August 2023, the Company's Board authorized increases to the repurchase program of $296.0 million and $447.6 million, respectively.
The repurchase program does not obligate the Company to acquire any particular amount of Class A common stock, has no expiration date and may be modified, suspended, or terminated at any time at the Company's discretion. The Company retires its Class A common stock upon repurchase, and records any excess of the cost of the repurchased shares over their par value as a reduction to additional paid-in capital, or in the absence of additional paid-in capital, to accumulated deficit. During the nine months ended September 30, 2023 and 2022, the Company repurchased 46,665,285 and 9,042,407 shares of Class A common stock for an aggregate amount, including commissions and fees, of $1,153.6 million and $338.8 million, respectively.
8. Stock-based Compensation
The Company maintains three equity compensation plans that provide for the issuance of shares of its common stock to the Company’s employees, directors, consultants and other service providers: the 2021 Equity Incentive Plan (the "2021 Plan"), the 2021 Partner Studio Incentive Plan, and the 2021 Employee Stock Purchase Plan (the "ESPP").
In March 2023, the Company’s Board of Directors (the "Board"), upon recommendation of the Compensation Committee of the Board (the "Compensation Committee"), granted to each of Adam Foroughi, the Company’s CEO and Chairperson, and Vasily Shikin, the Company’s CTO, 6,902,000 performance-based RSUs (“PSUs”), and delegated authority to Mr. Foroughi to grant up to additional 3,451,000 PSUs to non-executive employees (the "Additional Participants") in consultation with the chair of the Compensation Committee under the 2021 Plan. The PSUs are divided into five equal tranches that are eligible to vest based on the achievement of certain stock price targets (see below), measured based on the minimum closing price of the Company’s Class A common stock over a consecutive 30 trading day period during the five-year performance period beginning on the date of grant, subject to the recipient’s continued employment through the applicable vesting date. In the event of a change in control of the Company during the performance period, any unvested PSUs are eligible to vest a pro-rated amount if the per share transaction price in the change in control is between two stock price targets that have not previously been achieved, subject to the recipient’s continued employment through the date immediately prior to the change in control. PSUs for Mr. Foroughi and Mr. Shikin may continue to vest for up to one year after termination of employment if certain conditions are met. In April 2023, the remaining 3,451,000 PSUs were granted to the Additional Participants.    
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The following table presents the number of PSUs that are eligible to vest based on the achievement of the respective stock price targets for each of Mr. Foroughi, Mr. Shikin and the Additional Participants (in aggregate):
PSUs Eligible to Vest
Company Stock Price TargetAdam ForoughiVasily ShikinAdditional Participants
(in aggregate)
$36.00 1,380,400 1,380,400 690,200 
$46.75 1,380,400 1,380,400 690,200 
$57.50 1,380,400 1,380,400 690,200 
$68.25 1,380,400 1,380,400 690,200 
$79.00 1,380,400 1,380,400 690,200 
6,902,000 6,902,000 3,451,000 
The weighted-average grant date fair value of the PSUs for Mr. Foroughi, Mr. Shikin and the Additional Participants was $7.60, $6.03, and $8.76 per share, respectively. The Company used a Monte Carlo simulation model to calculate the grant date fair value of the PSUs and the derived service period for each of the five vesting tranches, which is the measure of the expected time to achieve the respective stock price target, as described above. The Monte Carlo simulation model incorporates the likelihood of achieving the stock price targets and requires the input of assumptions including the underlying stock price, expected volatility, expected term, risk-free rate and dividend yield. The Company also applied a discount for lack of marketability to the value of PSUs for employees other than the CEO as the shares issued for these awards are subject to a holding period of approximately one year.
The Company will recognize stock-based compensation expense over the derived service period of each of the five vesting tranches, ranging from 1.7 to 3.1 years, using the accelerated attribution method. If the stock price targets are met sooner than the derived service period, the Company will adjust its stock-based compensation expense to reflect the cumulative expense associated with the vested awards. Subject to continued employment of the recipients, the Company will recognize stock-based compensation expense over the derived service period, regardless of whether the stock price targets are achieved.
In September 2023, 3,451,000 PSUs vested upon the achievement of the stock price target of $36.00 per share, resulting in a stock-based compensation expense of $25.7 million recorded for such PSUs during the three months ended September 30, 2023.
During the nine months ended September 30, 2023, the Company granted 4,631,285 restricted stock units ("RSUs") to certain employees under the 2021 Plan at the weighted average grant date fair value of $14.14 per RSU. These awards vest based on a service condition that becomes satisfied over generally one year.
In February 2023, the Board approved an increase to the maximum number of shares that can be purchased in each purchase period from 590 to 3,500 shares of Class A common stock. During the nine months ended September 30, 2023, 174,670 shares of Class A common stock were purchased under the ESPP.
Stock-based compensation expense is attributed to the cost center to which the award holder belongs.
The following table summarizes total stock-based compensation expense by function (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Cost of revenue$1,309 $1,230 $3,942 $4,988 
Sales and marketing26,025 10,035 62,121 30,386 
Research and development70,462 21,569 176,337 68,088 
General and administrative13,043 9,313 32,658 40,481 
Total$110,839 $42,147 $275,058 $143,943 

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9. Earnings Per Share
The following table sets forth the computation of basic and diluted net income (loss) per share attributable to common stockholders (in thousands, except share and per share data):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Basic EPS
Numerator:
Net income (loss) attributable to AppLovin$108,639 $23,771 $184,478 $(113,234)
Less:
Income attributable to options exercises by promissory notes(442)(102)(720) 
Income attributable to common stock subject to share repurchase agreements
(360) (228) 
Income attributable to unvested early exercised options(2)(18)(15) 
Income attributable to unvested RSAs
 (2)  
Net income (loss) attributable to AppLovin common stockholders—Basic$107,835 $23,649 $183,515 $(113,234)
Denominator:
Weighted-average shares used in computing net income (loss) per share—Basic341,435,759 369,389,170 357,009,609 371,736,763 
Net income (loss) per share attributable to common stock—Basic$0.32 $0.06 $0.51 $(0.30)
Diluted EPS
Numerator:
Net income (loss) attributable to AppLovin108,639 23,771 184,478 (113,234)
Less:
Income attributable to options exercises by promissory notes(423)(99)(698) 
Income attributable to common stock subject to share repurchase agreements
(345) (220) 
Income attributable to unvested early exercised options(2)(17)(15) 
Income attributable to unvested RSAs
 (2)  
Net income (loss) attributable to AppLovin common stockholders—Diluted$107,869 $23,653 $183,545 $(113,234)
Denominator:
Weighted-average shares used in computing net income (loss) per share—Basic341,435,759 369,389,170 357,009,609 371,736,763 
Weighted-average dilutive stock awards
15,470,463 9,073,037 11,249,904  
Weighted-average shares used in computing net income (loss) per share—Diluted356,906,222 378,462,207 368,259,513 371,736,763 
Net income (loss) per share attributable to AppLovin common stockholders—Diluted$0.30 $0.06 $0.50 $(0.30)







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The following table presents the forms of antidilutive potential common shares:
As of September 30,
20232022
Stock options exercised for promissory notes1,399,999 1,399,999 
Early exercised stock options5,736 191,748 
Stock options613,968 12,168,796 
Unvested RSUs
4,747,127 9,318,132 
ESPP 413,829 
Total antidilutive potential common shares6,766,830 23,492,504 

The table above excludes any unvested PSUs or potentially issuable shares under the incentive plan for certain key employees of Wurl since the related market and/or performance conditions had not been met as of September 30, 2023.
10. Income Taxes
The Company is subject to income taxes in the U.S. and in foreign jurisdictions. The Company bases the interim tax accruals on an estimated annual effective tax rate applied to year-to-date income and records the discrete tax items in the period to which they relate. In each quarter, the Company updates the estimated annual effective tax rate and makes a year-to-date adjustment to the tax provision as necessary. The Company’s calendar year 2023 annual effective tax rate differs from the U.S. statutory rate primarily due to jurisdictional mix of earnings, stock-based compensation expense, foreign derived intangible income deduction, and global intangible low-taxed income.
During the nine months ended September 30, 2023, there were no material changes to the Company's unrecognized tax benefits, and the Company does not expect material changes in unrecognized tax benefits within the next twelve months.
11. Segments
The Company determines its operating segments based on how its chief operating decision maker (“CODM”) manages the business, allocates resources, makes operating decisions and evaluates operating performance. The Company's two operating and reportable segments are as follows:
Software Platform: Software Platform generates revenue primarily from fees paid by advertisers for the placement of ads on mobile applications owned by Publishers.
Apps: Apps generates revenue when a user of one of the Apps makes an in-app purchase and when an advertiser purchases the digital advertising inventory of the Company's portfolio of Apps.
The CODM evaluates the performance of each operating segment using revenue and segment adjusted EBITDA. The Company defines segment adjusted EBITDA as revenue less expenses, excluding depreciation and amortization and certain items that the Company does not believe are reflective of the operating segments’ core operations. Expenses include indirect costs that are allocated to operating segments based on a reasonable allocation methodology, which are generally related to sales and marketing activities and general and administrative overhead. Revenue and expenses exclude transactions between the Company's operating segments. The CODM does not evaluate operating segments using asset information, and, accordingly, the Company does not report asset information by segment.








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The following table provides information about the Company's reportable segments and a reconciliation of the total segment adjusted EBITDA to income (loss) before income taxes (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2023202220232022
Revenue:
Software Platform$504,452 $306,592 $1,265,273 $742,972 
Apps359,804 406,507 1,064,553 1,371,779 
Total Revenue$864,256 $713,099 $2,329,826 $2,114,751